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How to reduce your Home Loan interest rate? Here are 6 proven strategies!
Buying a home to call your own is a dream for many, but it comes at a massive cost. Though you might be saving for it, owing to the skyrocketing prices of real estate, that money might not be enough. However, this dream can come true with the help of a Home Loan.
Here at ICICI Bank, our Home Loan process is extremely simple. What’s more, our existing partners, non-ICICI Bank customers and even Non-Resident Indians (NRIs) can apply for a Home Loan online and get a digital sanction in 6 simple steps through our Express Home Loan, a self-service digital platform.
That being said, taking a Home Loan is a big decision. Without proper strategy and understanding of the goal, you might fall into a financial mess. You might end up paying extra interest rates unnecessarily. For a better approach, you can go through the following suggestions and make an informed decision. We will suggest a few ways in which you can reduce your interest rates.
Ways to reduce Home Loan Interest Rates
Here are six simple and proven strategies that can help you save money on your next Home Loan.
1. Improve your Credit score
Your credit score is one of the most important factors that all lenders will consider when determining the interest rate you will need to pay on your Home Loan. The better your credit score, the lower the interest rate you will have to pay. This makes it so important for borrowers to maintain a good credit score. You can do this by paying your bills on time, keeping your credit utilisation ratio low, not applying for too many loans at the same time and not opening too many credit accounts.
You should also check your credit score online (free) and take necessary measures to improve it. For a Home Loan from ICICI Bank, you can easily use our eligibility calculator to get the most accurate estimate of the amount you can borrow. You can apply for an instant sanction, even if you have not finalised the property, right here on our website.
https://www.icicibank.com/calculator/home-loan-eligibility-calculator
2. Choose the right loan tenure
The loan tenure is the period of time over which you will be paying back your Home Loan. A longer tenure will translate to a lower EMI (Equated Monthly Instalment), but the interest you will end up paying is likely to be higher. It is important you consider all your financial obligations and choose an ideal repayment tenure for you. Again, you can use our EMI calculator to determine the best tenure for your Home Loan. You can always consider making prepayments to reduce your loan tenure and save on interest, though this may come with additional charges.
3. Opt for a Floating Interest Rate
Home Loans can be offered either on Fixed or Floating Interest Rates. Fixed Interest Rates remain constant throughout the loan tenure, while Floating Interest Rates fluctuate, depending on market conditions. Generally, Floating Interest Rates are lower than fixed rates, which makes them a more cost-effective option in the long run. However, nothing is certain, interest rates can fluctuate and you could end up paying more if the rates increase.
4. Negotiate with your lender
Us Indians can bargain over anything but so many borrowers miss a step by not negotiating with their preferred lender to get a better interest rate. You can always negotiate if you have a good credit score, a stable income and a positive repayment history. After all, building a relationship never hurts. You can also leverage your relationship with the bank (we leverage it ourselves if you have banked or continue to bank with us) such as having a salary account or a long-standing account, to negotiate a better deal.
5. Make a higher down payment
A down payment is a lump sum amount you pay in one go for taking a loan. This is quite important for the rate of interest you will have to pay on the remaining amount. A higher down payment means you borrow less money, which obviously results in a lower interest rate and EMI. A healthy down payment also shows the lender that you are committed to repaying your Home Loan, which makes you a less risky borrower. If possible, try to make a higher down payment to reduce your overall home loan interest rate.
6. Transfer your Home Loan
If you have been repaying your Home Loan for a few years and have a good repayment history, you can consider transferring your loan to another lender who offers a lower interest rate. This is known as a Home Loan Balance Transfer and is available at ICICI Bank.
However, before you make the switch, please calculate the costs involved in the transfer, such as processing fees and foreclosure charges. It is also advisable for you to compare the interest rates, loan tenure and other terms and conditions before making a decision.
At ICICI Bank, our Home Loan offerings are not just restricted to the purchase of a property. Whether you want to purchase a new place, build a new one, or you want to refurbish the place you currently reside in: we offer a wide range of products to meet every borrower’s requirements. Our Home Loans come with attractive interest rates for a tenure that can be stretched up to 30 years. You can check out Balance Transfer Loans, Home Improvement Loans, Land Loans, Home Loan Overdraft, Money Saver, Step-Up Home Loans and even loans under the Pradhan Mantri Awas Yojana here at ICICI Bank.
Conclusion
Getting lower Home Loan interest rates can save you a lot of money over the repayment tenure. By following these six effective strategies, you can certainly lower Home Loan interest rates and make your loan much more affordable. To sum up, maintain a good credit score, choose the right loan tenure, go for a Floating Interest Rate, negotiate with your lender, make a larger down payment and consider transferring your Home Loan to another lender. You can also use our housing loan EMI Calculator to determine the best loan tenure and EMI for your financial standing.
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